Reaganomics in Galactic Civilizations II

I’ve played a pretty good amount of GalCiv2 at this point, and I am confident I have a good feel for what works and what doesn’t. In trying to maximize the long-term growth and power of my galactic empires, I’ve noticed a key strategy:

Keeping taxes LOW over the long term does more to increase my income from taxes over any given number of years than raising taxes. This occurs because GalCiv2’s economic model is fundamentally different from many strategy games of this kind.

In all of these games, tax income is almost always based directly on population. You have more people, so if you set a certain tax rate, you get income based on that. Also, in most of these games, population growth is typically a function of how much food or other resource can be produced. Typically, raising taxes is okay over the long term, because the population will ALWAYS produce the same amount of food, regardless of how happy or unhappy the populace is. (This assumes that unhappy people are still working. In Civilization games, you can force unhappy people to work through various means, like Secret Police, etc.)

In Galactic Civlizations II, however, happiness of the people relates directly to how quickly the populace reproduces. So, if you keep taxes lower, people will be happier, and hence next year, there will be more people paying taxes. Lower taxes encourages more economic growth, which in turn will bring you more tax revenue.

There is a dramatic increase in economic growth as taxes are kept lower. Once taxes start getting higher, however, growth will stagnate, leaving you with less money and less money, as maintenance costs increase due to colony and military development.

Another difference is in how Galactic Civilizations II divvies out production. In Civilization, each “person” works a map tile which will output food, raw industry, or trade. So, when you raise taxes, you aren’t actually changing the rate of production, you are merely changing how much of trade output is converted directly to cash. But in GalCiv2, the process is reversed. Tax income gets funneled directly into your production, with any leftovers being converted to cash. This completely changes the dynamic of how taxes affect your industrial output.

For instance, let’s say we modeled the U.S. within the context of GalCiv2. Economic output is measured by a “tax rate”. (Actually, it would be more accurate to refer to this as the GDP.) Each week in GalCiv2, the GDP (taxes) is spent on private industry and research. Whatever is left over comes back to the Federal Government. If the tax rate is lowered in GalCiv2, initially less money is coming in, but as time goes on the generators of wealth (people in GalCiv2, entrepreneurs in the U.S.) will quickly increase to make up for any lost income. So, imagine the GDP expanding as taxes are lowered, but decreasing as taxes are raised (which causes growth to stagnate, which reduces your income as the empire continues to construct social and military endeavors which will require ever more money to maintain).

So, interestingly enough, so-called “trickle-down” economics actually works in GalCiv2. Oh… I should also point out that the tax in GalCiv2 is a “flat tax.”

Heh.